Suadi Arabia: Temporary postponement of plans to increase oil production capacity

17 Sept., 2020

Saudi Aramco had received a directive from the Ministry of Energy to increase its Maximum Sustainable Capacity (MSC) from 12 million barrels per day to 13 million barrels per day.

However, after the historic agreement between the world’s major oil producers within the framework of the “OPEC Plus” group in April 2020 to reduce production to restore stability in the markets and prevent prices from collapsing, the Kingdom’s plans to increase oil production capacities were postponed until conditions in the oil markets became favorable.

Increasing production capacity requires huge investments to establish production infrastructure that is difficult to carry out in conditions of low oil prices. Therefore, the implementation of these directives has been postponed despite preserving plans to implement them until the appropriate conditions for implementation arise. This is in line with Nasser’s statements about the company’s intention to reduce capital expenditures for the remainder of the year 2020 and for 2021 as well, to a minimum.

Amin Al-Nasser, CEO of Aramco said: “Yes … we had announced earlier our intention to maintain our full production capacity at a rate of 12 million barrels per day, as well as to raise it to 13 million barrels per day, and we are still determined to do so.”

Officials confirm the flexibility of Aramco and its ability to deal with low prices and declining profits in a flexible manner, because capital expenditures in the exploration and production sector in the Kingdom do not exceed $ 4.7 per barrel, which is the lowest in the energy sector in the world.